Microsoft shares fall 12% in one day

Following the release of its disappointing financial results, Microsoft shares suffered their biggest one day fall on Wall Street since the tech crash of 2000.

At the close of trading Thursday, a Microsoft share was worth US$35.44. Then Microsoft announced its annual financial results, which included a writedown of $900,000 on unsold Surface RT tablets.

Shares closed on Friday at $31.10, a massive fall of 12% on the day. The only day Microsoft has ever lost a higher proportion of its value was on 24 April 2000, when the whole market crashed after the irrational exuberance of the 1990s.

This is a disaster for Microsoft. There is no way to put a positive spin on it. CEO Steve Ballmer knew it was coming, and attempted to pre-emptively take some sting out of the bite with his massive reorganisation, announced a week earlier. Shuffling the deck to give the appearance of action in times of adversity is a time-honoured tradition.

Microsoft shares have been at a five year high recently. So the drop has a bit of a cushion. But that simply means they probably have further to fall, especially as a number of financial analysts have now downgraded the stock to a ‘sell’.

The fall knocked $36 billion off Microsoft’s market capitalisation. That means it is still worth $258 billion – it is one of the few companies large enough to take the billion dollar hit that the failure of the Surface RT has meant.

It still dominates the non-Apple desktop, but the problem is that the desktop – Apple or not – is not where the action is anymore. Windows 8 has not been a major success, on any platform, and the world is moving on. Just as Microsoft and the PC ended the dominance of the mainframe, so Apple and Android and smartphones and tablets are ending the dominance of the PC.

The world of technology, like the ocean, moves in waves. Microsoft caught the PC wave and made it its own – but it is floundering now in its attempts to maintain relevance in a world where its products and its business model look increasingly anachronistic.

Microsoft will not go away, just as IBM did not go away. IBM was once as big as its top five competitors combined. Now it is just another computer company. Microsoft is headed the same way, and nothing it can do or say will alter that tectonic shift.

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Graeme Philipson is senior associate editor at iTWire and editor of sister publication CommsWire. He is also founder and Research Director of Connection Research, a market research and analysis firm specialising in the convergence of sustainable, digital and environmental technologies. He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.